The Rise Of Centralized Cryptocurrencies

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The Gemini Dollar (USDG) is a new stable coin pegged at parity to the USD. It has been launched by the Gemini Exchange headquartered in the United States. Crypto coding expert Alex Lebed found that the USDG is completely centralized. Meaning, Gemini can freeze accounts, freeze the entire USDG coin supply, and print infinite USDG. But this is not just an isolated case as centralized cryptocurrencies like the USDG are becoming more common these days.

There are actually a couple of centralized cryptocurrencies hiding in plain sight among the top 10 cryptocurrencies by market cap. Tether (USDT), with a market cap of USD 2.76 billion, is the most popular stable coin, often used in place of the USD when the USD is not available. The popularity and success of USDT probably has a lot to do with the creation of USDG, and just like USDG the USDT is centralized to an extent. USD 30 million of USDT was stolen in a hack, and Tether Limited unleashed an emergency hard fork which reversed the hack.

This means USDT is not immutable, where immutable means transactions cannot be reversed. Immutability is one of the key advantages of Bitcoin. The fact that USDT is not immutable makes it much like fiat currency payment networks, such as banks or PayPal, and means users could have their funds reversed or frozen at any time.

EOS has a market cap of USD 4.84 billion, and it is run by a centralized organization of block producers. The EOS block producers work together and have in the past frozen EOS accounts since it was reported that a hack occurred. This means all EOS accounts can be frozen, just like when using a bank or PayPal. This likely is part of the reason EOS’ price dropped significantly after launch.

The People’s Bank of China (PBoC) is planning on launching a Chinese national cryptocurrency, and it is clear that the PBoC will have centralized control to print this crypto at will and freeze accounts. When the PBoC crypto launches, it has the potential to be one of the top cryptos in the world, since it would be the only crypto in China that can be traded legally for fiat.

Essentially, regulations on cryptocurrency are becoming tighter with each passing month, and it is much easier to get a crypto approved for launch by the government if it is centralized. If the government comes to Gemini or Tether Limited with any concerns about money laundering regarding a specific account, Gemini and Tether Limited can simply freeze the account. For centralized cryptocurrencies like USDG and USDT, the government has just as much control as the organizations running the crypto, and this creates a precarious situation for users of those cryptocurrencies.

Crypto users should be careful and fully understand a crypto before they buy it and begin making transactions, and it is best to avoid centralized cryptocurrencies. Most cryptocurrencies are still decentralized and immutable, and these are optimal for business since there’s no chance of the government or a corporation freezing the money. There’s even a decentralized stable coin called Stableunit, created by Lebed, the same person who discovered that USDG is centralized.

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